Grant v Lammas - [2016] NZHC 2674

IN THE HIGH COURT OF NEW ZEALAND NAPIER REGISTRY

CIV-2016-441-34 [2016] NZHC 2674

UNDER
s 297 of the Companies Act 1993 and

Part 18 of the High Court Rules

IN THE MATTER OF

the liquidation of Central Tyres
Waipukurau Limited (in liquidation)

BETWEEN

DAMIEN GRANT AND STEVEN KHOV Plaintiffs

AND

KEITH LAMMAS Defendant

Hearing: 7 November 2016

Counsel:

K E Barry for Plaintiffs
No appearance for Defendant

Judgment:

8 November 2016

JUDGMENT OF WILLIAMS J

[1] The plaintiffs are the liquidators of Central Tyres Waipukurau Limited. The defendant is a former employee of that company. Central Tyres was put into liquidation on 16 April 2015. Within the two years prior to that date – that is
6 December 2013, Central Tyres sold a 2011 Ford Ranger, registration no. FZM517 to the defendant for $20,000. The plaintiffs say this transaction occurred at a substantial undervalue because the market value of the vehicle was, at the time,
$31,200. They claim the $11,200 difference.

[2] As the defendant took no steps in the matter, the application proceeded before me by way of formal proof.

[3] Section 297 applies. It provides:

GRANT & ANOR v LAMMAS [2016] NZHC 2674 [8 November 2016]

(1) Under subsection (2) the liquidator may recover from a person (X)
the amount C in the formula A − B = C, where—

(a) A is the value that X received from a company under a transaction to which the company was or is a party; and

(b) B is the value (if any) that the company received from X
under the transaction.

(2) The liquidator may recover the difference in value (that is, C in the formula in subsection (1)) from X if—

(a) the company entered into the transaction within the specified period; and

(b) either—

(i) the company was unable to pay its due debts when it entered into the transaction; or

(ii) the company became unable to pay its due debts as a result of entering into the transaction.

(3) For the purposes of this section,—

(a) transaction has the same meaning as in section 292(3): (b) specified period means—
(i) the period of 2 years before the date of commencement of the liquidation together with the period commencing on that date and ending at the time at which the liquidator is appointed; and

(ii) in the case of a company that was put into liquidation by the court, the period of 2 years before the making of the application to the court together with the period commencing on the date of the making of that application and ending on the date on which, and at the time at which, the order of the court was made; and

(iii) if—

(A) an application was made to the court to put a company into liquidation; and

(B) after the making of the application to the court a liquidator was appointed under paragraph (a) or paragraph (b) of section 241(2),—

the period of 2 years before the…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading Grant v Lammas

Details

AGLC: Grant v Lammas [2016] NZHC 2674
Case: [2016] NZHC 2674
Decision Date: 8 November 2016

CaseChat Overview and Summary

In the case of Grant and Another v Lammas, the plaintiffs were the liquidators of Central Tyres Waipukurau Limited, a company that was placed into liquidation on 16 April 2015. The defendant, Keith Lammas, was a former employee of the company. The liquidators sought to recover $11,200 that they claimed was the difference between the value of a 2011 Ford Ranger sold to the defendant by the company and its market value at the time of the sale. The company sold the vehicle to the defendant for $20,000, while its market value at the time was $31,200. The defendant did not take any steps to contest the claim. The court had to determine whether the transaction was at an undervalue, whether it was within the specified period under the Companies Act 1993, and whether there was any defence available to the defendant.

The court found that the transaction was indeed a transaction under the Act and that it was within the specified period, being within two years prior to the liquidation. The court also found that the vehicle was sold at an undervalue and that the company was unable to pay its debts when it entered into the transaction. The court noted that the company had accumulated tax arrears of $94,000 to the IRD and had failed to repay other debts of over $14,000 by the end of November 2013. The $20,000 payment for the truck was immediately disbursed to meet those other debts. The court also found that the defendant had no defence available to him under the Act as he had taken no steps to contest the claim and there was no factual basis to suggest that he received the vehicle in good faith or that he did not know that the company was insolvent.

The court held that the liquidators were entitled to recover the $11,200 difference between the sale price and the market value of the vehicle. The court also awarded the liquidators costs in the sum of $400 plus reasonable disbursements. The court noted that the judgment sum was modest and that a modest award of costs was in order. The court found in favour of the plaintiffs and ordered the defendant to pay the sum of $11,200 plus costs to the liquidators.

Orders